Net Interest (Substack canonical)

Two Tribes

The article reflects on the historic reversal of power between bond and equity traders, noting how equities eclipsed fixed‑income revenue after the 1994 bond market collapse. It highlights the cultural divide that still separates the two desks, with bond traders emphasizing principal preservation and equities chasing upside. Recent analysis from UBS warns that rapid AI disruption could drive high‑yield defaults to 3‑6%, leveraged loan defaults to 8‑10% and private‑credit defaults to 14‑15%, far above current levels. These stress scenarios raise serious concerns about banks’ capital buffers and contagion risk across the credit ecosystem.